Do I have to pay tax on unemployment Washington ESD benefits?
I've been collecting unemployment from Washington ESD since October and just realized I might owe taxes on these payments. I never had to deal with this before and I'm getting conflicting information. Some people say unemployment is taxable income, others say it's not. I've received about $8,500 so far and I'm worried I'm going to get hit with a huge tax bill. Did anyone else have to pay taxes on their Washington ESD benefits? Should I have been setting money aside this whole time?
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Dylan Cooper
Yes, unemployment benefits are considered taxable income by both federal and state governments. Washington ESD should have given you the option to have taxes withheld when you first filed your claim. You can also request tax withholding by logging into your account.
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Fatima Al-Farsi
•I don't remember seeing that option when I filed. Is it too late to start having taxes taken out now?
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Dylan Cooper
•No, you can change your withholding election anytime by logging into your SecureAccess Washington account and updating your preferences.
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Sofia Perez
Yeah unemployment is definitely taxable. I learned this the hard way last year when I owed like $2,000 at tax time. Washington ESD will send you a 1099-G form showing how much you received.
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Fatima Al-Farsi
•Oh no, $2,000! How much unemployment did you collect to owe that much?
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Sofia Perez
•I got about $15,000 total. The tax hit depends on your other income and tax bracket too.
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Dmitry Smirnov
I've been dealing with Washington ESD for months and couldn't get through to ask about tax withholding. The phone system is impossible. Finally found claimyr.com which actually got me connected to a real person who explained everything about taxes and withholding options. There's even a demo video at https://youtu.be/7DieNd3C7zQ showing how it works.
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Fatima Al-Farsi
•How much does that service cost? I've been trying to call Washington ESD for weeks about this tax question.
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Dmitry Smirnov
•It's worth it just to finally talk to someone who can give you straight answers. Way better than calling 800 times and getting hung up on.
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ElectricDreamer
•I used Claimyr too after getting frustrated with the busy signals. The agent walked me through setting up tax withholding and explained exactly what forms I'd get for tax season.
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Ava Johnson
The IRS treats unemployment compensation as ordinary income, so yes you'll owe federal taxes. For state taxes it depends - some states don't tax unemployment but Washington state doesn't have income tax anyway so that's not an issue here.
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Miguel Diaz
•Wait, if Washington doesn't have state income tax, then I only owe federal taxes on unemployment?
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Ava Johnson
•Correct. Washington has no state income tax, so you only need to worry about federal taxes on your unemployment benefits.
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Zainab Ahmed
This is why I always have them take out the maximum withholding from my UI payments. Better to get a refund than owe money at tax time.
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Fatima Al-Farsi
•What's the maximum they'll withhold? Is it enough to cover what I'd owe?
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Zainab Ahmed
•I think it's 10% federal withholding. Whether that's enough depends on your total income and tax situation.
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Sofia Perez
Just a heads up - even if you don't have withholding set up, you might need to make estimated quarterly payments if you owe more than $1,000. The IRS can hit you with penalties for underpayment.
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Fatima Al-Farsi
•How do I know if I need to make quarterly payments? This is getting complicated.
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Dylan Cooper
•Use IRS Form 1040ES to calculate if you need quarterly payments. Generally if you expect to owe $1,000 or more you should make estimated payments.
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ElectricDreamer
The 1099-G form Washington ESD sends will have your total benefits in Box 1. That's the amount you report as income on your tax return. Make sure you keep this form for your records.
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Fatima Al-Farsi
•When do they send out the 1099-G forms? I haven't gotten mine yet.
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ElectricDreamer
•They're required to send them by January 31st. You should get it soon. You can also download it from your Washington ESD account online.
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Miguel Diaz
ugh i wish someone had told me this when i first started collecting. now im gonna owe like 3 grand probably
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Sofia Perez
•You can still set up withholding for future payments to help with next year's taxes.
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Miguel Diaz
•yeah i already did that after reading this thread. should have done it months ago
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Dmitry Smirnov
Pro tip: if you can't get through to Washington ESD to set up withholding, you can also just set aside money yourself. I put 20% of each payment into a separate savings account for taxes.
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Fatima Al-Farsi
•20% seems like a lot. Is that really necessary?
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Dmitry Smirnov
•Better safe than sorry. It depends on your tax bracket but 20% should cover most situations with some buffer.
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Ava Johnson
One thing to remember is that unemployment benefits aren't subject to Social Security or Medicare taxes (FICA). So it's just regular income tax you need to worry about.
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Dylan Cooper
•That's correct. No FICA taxes on unemployment compensation, which helps reduce the overall tax burden somewhat.
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Zainab Ahmed
I actually got lucky last year because I had other deductions that offset most of my unemployment income. Don't panic until you run the numbers - you might not owe as much as you think.
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Fatima Al-Farsi
•What kind of deductions? I'm looking for anything that might help reduce what I owe.
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Zainab Ahmed
•Standard deduction, charitable contributions, student loan interest if you have it. Also job search expenses might be deductible in some cases.
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Sofia Perez
The worst part is Washington ESD doesn't warn you about this stuff upfront. They should make it clearer that benefits are taxable when you file your initial claim.
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ElectricDreamer
•They do mention it in the handbook but most people don't read through all that paperwork when they're stressed about losing their job.
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Miguel Diaz
•exactly i was just trying to get benefits approved not thinking about taxes
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Fatima Al-Farsi
Thanks everyone for the info. I'm going to log into my account right now and set up tax withholding. Better late than never I guess.
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Dylan Cooper
•Good plan. Even if you can't avoid owing for this year, at least you'll be prepared for next year if you're still collecting.
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Dmitry Smirnov
•If you have trouble accessing your account or need to talk to someone about your options, that Claimyr service I mentioned earlier really helped me navigate the system when I couldn't get through on the phone.
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Ava Johnson
For what it's worth, if you do end up owing money at tax time, the IRS has payment plan options. You don't have to pay everything at once if you can't afford it.
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Fatima Al-Farsi
•That's good to know. How does the payment plan work?
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Ava Johnson
•You can set up an installment agreement online or by phone. There are fees involved but it's better than not paying at all.
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ElectricDreamer
Also remember that if you got unemployment in 2024, you need to report it on your 2024 tax return that's due in April 2025. Don't wait until the last minute to deal with this.
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Sofia Perez
•Yeah and if you're getting a refund from other withholding like a previous job, that can help offset what you owe on the unemployment.
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Miguel Diaz
wish theyd just automatically take out taxes like they do with regular paychecks instead of making it optional
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Dylan Cooper
•Some people prefer to get the full amount and handle taxes themselves, especially if they're in a lower tax bracket or have other deductions.
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Miguel Diaz
•i guess but it would save a lot of people from getting surprised at tax time
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Zainab Ahmed
The key thing is to not ignore this. I know it's stressful to think about owing money when you're already dealing with unemployment, but dealing with it now is better than facing penalties and interest later.
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Fatima Al-Farsi
•You're absolutely right. I'm going to start setting aside money from my remaining payments and get the withholding set up today.
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Dmitry Smirnov
One last thing - if you're doing job search activities as required by Washington ESD, keep track of those expenses. Some job search costs might be tax deductible.
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ElectricDreamer
•Good point. Things like resume printing, job fair travel, and professional development courses can sometimes be deducted.
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Fatima Al-Farsi
•I hadn't thought of that. I've spent quite a bit on gas driving to interviews and career fairs.
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Sofia Perez
Bottom line - yes you have to pay taxes on unemployment benefits. Set up withholding if possible, save money if not, and don't panic. Lots of people deal with this every year.
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Fatima Al-Farsi
•Thanks everyone. This thread has been super helpful. At least now I know what to expect and can plan for it.
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Dylan Cooper
Glad we could help clarify things. Tax season can be stressful enough without surprises. Make sure to keep all your Washington ESD documents organized for when you file your return.
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Ava Johnson
•And consider talking to a tax professional if your situation is complicated or you're unsure about anything. The cost might be worth it for peace of mind.
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